Cartoon Caricatures of Regulatory Reform

All right, readers, take out a pencil and paper and answer the following question.

Efforts by the Republican Congress in 1995 to require more use of benefit-cost analysis and quantitative risk assessment in environmental, safety, and health regulation represented:

A. a heroic attempt to rescue the U.S. economy from a welter of suffocating and ill-considered rules concocted by unelected bureaucrats.

B. a thinly veiled effort to undo nearly twenty-five years of environmental, safety, and health gains just to benefit fat-cat corporations.

If you find yourself longing for a third option—C, neither of the above—you must not have been following the 1995 debate over regulatory reform on the TV evening news or in the pages of most U.S. newspapers, for generally only options A and B were portrayed there. Many newspapers, in fact, showcased regulatory reform in an unusual venue—their comic pages, including the widely read "Doonesbury."

The truth, of course, lies well between these extremes. In my view, Congress and the Clinton administration missed an excellent opportunity in 1995 to make much-needed improvements in the way federal regulatory agencies issue new rules. In the best tradition of American politics, the blame should be shared bipartisanly.

The year in review

Let's start with a quick recap of the year's events, beginning with a clarification on the subject of this article. Many proposals were put forward in both houses of Congress in 1995 under the banner of regulatory reform. In addition to legislation related to benefit-cost analysis and risk assessment, these proposals included such things as a moratorium on the issuance of new regulations; limitations on the paperwork burdens associated with regulation; restrictions on the "mandates" (regulatory costs) that the federal government could impose on lower levels of government; and, perhaps most controversially, a proposal to prohibit the federal government from imposing limitations on private landowners without compensating them for any reduction in the value of their property resulting from these limitations (so-called takings legislation).

With the exception of The Unfunded Mandates Reform Act of 1995, which deals with federal regulatory burdens imposed on state and local governments, none of these proposals had been enacted by Congress by the fall of 1995. I concentrate in this piece on the legislation dealing with benefit-cost analysis and risk assessment.

Action in the House of Representatives

With their first majority in the House in forty years, the Republicans immediately began to put into law the provisions of their Contract with America dealing with benefit-cost analysis and risk assessment (more about the Contract later). On March 3, 1995, only five weeks after being sworn in, the members of the House voted 277-141 to pass H.R. 1022 (later renumbered H.R. 9), "The Risk Assessment and Cost-Benefit Act of 1995."

This bill would require regulatory agencies to make changes in the way they assess and report information about the risks they intend to regulate. Despite claims to the contrary, the requirements in this bill pertaining to risk assessment would pose few serious obstacles to agencies in their rulemaking efforts. In fact, the U.S. Environmental Protection Agency (EPA), the Food and Drug Administration (FDA), and the Occupational Safety and Health Administration (OSHA), among others, already have or are in the process of adopting many of the practices the House bill would require.

With passage of the House bill, attention shifted to the Senate and S. 343, led by Majority Leader Robert Dole (R–Kansas). In one very important respect, this bill was much less revolutionary than H.R. 9. Whereas the latter would require agencies to balance benefits and costs even under statutes where that had been prohibited in the past, S. 343 would not explicitly "trump" these statutes, with the exception of the Delaney clause in the Federal Food, Drug and Cosmetic Act (which deals with health risks from food additives). As such, the scope and ultimate impact of S. 343 are less in comparison with the House bill.

In other important respects, however, S. 343's reach would extend beyond that of its House counterpart. For example, the new benefit-cost balancing requirements in H.R. 9 would apply only to new regulations written after the bill had passed. Under S. 343, however, each regulatory agency would have to establish a schedule for reviewing all existing major regulations in light of the new benefit-cost criteria, and the rights of individuals to petition for such reviews would be strengthened. Each agency then would have as long as eleven years in which to complete these reviews and make changes in any regulations for which the benefits did not justify the costs. Also, S. 343 would enlarge the opportunities that individuals and corporations have for challenging in court the actions of regulatory agencies. Finally, it would establish a procedure through which both houses of Congress could review and essentially nullify any new regulation to which they took exception, with the president having the right to veto any such congressional action.

Critics of H.R. 9 and S. 343, of whom there are many, have been cheered by the collapse of legislation in the Senate. They are troubled by many provisions in both bills. For instance, they have argued that those benefits and costs that are quantified, and particularly those that are expressed in dollar terms, inevitably will be given greater weight in decisionmaking than "softer," unquantified effects. They worry further that when courts review important agency decisions (most major regulations are challenged in court), some of those decisions may be overturned on the grounds that, when conducting its benefit-cost analysis, the agency used the "wrong" value for a life saved, an ecosystem preserved, or an injury prevented. Finally, these critics are concerned that the additional steps, whether related to quantitative risk assessment or benefit-cost analysis, that agencies would have to take to issue a regulation would bog down the rulemaking process.

These are all quite legitimate concerns. In fact, no one knows how regulation would be changed if legislation such as that discussed here were enacted. Its impact would depend not only on how the benefit-cost requirements initially were interpreted and executed by federal regulatory agencies, but also on the deference that appeals courts give to the agencies when regulations are challenged. If the appeals courts consistently overturned agencies' decisions, legal challenges would proliferate and the regulatory process could easily bog down.

On balance, however, my guess is that these fears would not be borne out. In the last issue of Resources, for example, Winston Harrington and I argued strongly in favor of a qualitative balancing of benefits and costs in all standard-setting activities, including those involving health protection. To their credit, the architects of both H.R. 9 and S. 343 have explicitly directed that not every benefit or cost has to be quantified and expressed in dollar terms in the required analyses. Regulators should be able under such language to give these nonquantifiables appropriate weight in decisionmaking. In fact, as I read the language in both bills, it suggests to me that Congress is asking regulators to do no more than take action only when they can answer the following question in the affirmative: All things considered, will this regulation do the country more good than harm? If that is how the language comes to be interpreted (a big "if," admittedly), that seems to me to be a pretty reasonable test to apply to any and all proposed regulations, and one that would allow regulators more than enough latitude to consider consequences that do not lend themselves to quantification or monetization.

If the 'benefit-cost legislation described above would improve the quality of federal regulation, as I believe it would, why has it not been enacted? The blame attaches to both parties.

First, several of the proposals dealing with regulation in the Republicans' original Contract with America were quite poorly conceived. These included such requirements as the establishment of nongovernmental, scientific peer review panels that would be given the power to delay the issuance of new regulations if the panels disagreed with the underlying science, as well as the imposition of a regulatory budget that would cap the costs that agencies could impose on the economy each year. The former would have given great power to people who were neither elected nor appointed, thus lessening accountability in regulation; the latter is attractive in concept, but we are a long way from being able to put such a measure into practice. These and many other problematical features were dropped from the House and Senate regulatory reform bills as they evolved, but a number of possible supporters were understandably put off by the misguided starting point of the debate.

The Republicans undermined their own efforts late in the debate, as well. In August, the House Appropriations Committee voted to reduce the budget of EPA by 26 percent when measured against the agency's fiscal year 1995 spending. Although deficit reduction will require sacrifices by all government agencies, the grossly disproportionate size of this cut suggested an antienvironment mentality that alarmed even many Republicans.

The Appropriations Committee also tacked nearly a score of "riders" onto the appropriations bill, including several that would foolishly prohibit EPA from enforcing certain air and water pollution regulations. If Congress thinks that particular regulations are ill-advised, it can and should openly debate and change the laws that gave rise to those regulations—not use the appropriations process to make "stealth" amendments. These actions suggested to many that the goal of at least some Republicans was not regulatory reform but rather relief or even evisceration. This, too, worked directly against the regulatory reform bill the Senate was debating. The Democrats, too, bear responsibility for the failure of regulatory reform, including a blown opportunity to make changes they now say they want. In 1993, the then-Democratic-controlled Senate voted 95–3 in favor of a regulatory reform bill put forward by Senator Bennett Johnston (D–Louisiana). This legislation would have made several of the changes contained in H.R. 9 and S. 343, but without many of the provisions in those bills that the Democrats now find objectionable. Rather than actively support or even accept this legislation (and the companion legislation that comfortably passed the House of Representatives, which also was controlled by the Democrats), the Clinton administration opposed the legislation and let it die. This set the stage for the more sweeping changes now being debated.

With the many possible advantages of and reasonable concerns about the use of benefit-cost analysis in regulation, the congressional debate ought to be clear and focused. So, too, should the vetting of this important issue in broadcast and print media. In neither forum has this been the case. Rather, the debate has been dominated by false claims that regulation is strangling the economy or that popular safeguards will be wiped off the books by reform legislation. We deserve and should insist upon more, though the smart money is probably best wagered on more cartoon caricatures.